On the 4H chart, bitcoin broke through the upper boundary of the triangle, approaching the level of $40,746. short after, it rebounded from it and resumed growth. I have already mentioned earlier that bitcoin could rise for the third time in recent months to the level of $45,408, the upper limit of the sideways channel. However, there are no long-term drivers for a rise. Traders should pay close attention to the sideways channel. As long as the digital asset is stuck within this channel, the bullish trend looks unlikely. Opinions of crypto experts are polarized. Some of them believe that bitcoin has already hit the bottom. So, it is ready to resume an upward movement. Others suppose that the correction has not been completed yet.
Fed's monetary policy, geopolitical tensions, and market optimism
As I have already said, the Fed's decision to tighten monetary policy is bearish for BTC. The higher the interest rate, the greater demand for safe-haven assets such as corporate bonds or rated ABS. If the regulator continues to raise the key rate, investors are sure to revise their portfolios in favor of safe-haven assets, abandoning risky ones. Bitcoin has already fallen by $30,000 from its recent peaks, while the Fed has just started to raise the interest rate. By the end of the year, the benchmark rate may grow to 2.5%. The Bank of England and other central banks are also tightening monetary policy.
The geopolitical factor also greatly impacts the crypto market. Some countries, especially the EU, are on the verge of an energy crisis as energy commodities are soaring. The cost of crypto mining is growing exponentially, making bitcoin more expensive. As a result, it is getting rather unprofitable to mine BTC. As the geopolitical conflict continues to escalate, oil and gas prices are unlikely to decline in the near future.
At the same time, some experts reckon that bitcoin is the best hedge against inflation. They assume that inflation will remain high in many countries of the world even if central banks raise the key rate throughout 2022. This is partly true. Currently, the key rates of many central banks are at ultra-low levels. Central banks need to hike benchmark rates at least to a neutral level in order to somehow ease inflation. In the US, the target level is 2.4%. Under the best-case scenario, the regulator is likely to raise the key rate to this level by the end of the year. This is why BTC might be used as a hedge against inflation in 2022. However, it should climb higher. breaking out of the narrow range. If bitcoin fails to grow, then it is unlikely to be the hedge. According to the latest Glassnode analysis, more than half of short-term traders are currently incurring losses as the current BTC price is lower than the market price.
On the 4H chart, the quotes broke out of the triangle pattern. BTC may rise to the target level of $45,408. There are simply no other important levels than this one and the $34,267 level. Bitcoin is likely to be trapped in the sideways channel in the long term, so it can move in any direction within the channel. A rebound from the $45,408 level may lead to a new fall. If the price breaks above this level, it may approach the upward target of $48,682.